North American housing construction data is notably stronger in early 2023

While too early to call it a trend, recently released stronger housing figures may indicate an improving climate for home construction and sales.

Residential construction picked up in February after a sluggish end to last year, according to the US Census Bureau. Housing starts increased to a SAAR (seasonally adjusted annual rate) of 1.450 million units, 9.8% above January and the strongest pace since September 2022. Despite the gain, single-family construction continued to lag.

Housing permits in February jumped 13.8% from January, coming in at 1.524 million units (SAAR). That is also the strongest pace since last September.

New-home sales improved in February, climbing to 640,000 units (SAAR), a slight increase over January’s pace and the highest rate since last August. Lower prices have helped. The average sales price of new homes hit $564,900 last July before dropping gradually to $479,800 in January. In February, the average price increased to $498,700.

Existing-home sales, according to the National Association of Realtors (NAR), increased from 4.00 million in January to 4.58 million in February, a gain of 14.5% and the strongest sales pace since last September. The increase was the first in 12 months. The median sales price of existing homes bumped slightly higher to $363,000 in February from $361,200 the month prior. It was the first increase since June of last year.

Some solid figures support the gains in home construction and sales. One of them is mortgage rates. After beginning the year at 6.48%, the 30-year fixed-rate mortgage declined to 6.09% in February. After climbing again in early March to 6.73%, it declined to 6.32% this week.

“Inventory levels are still at historic lows. Consequently, multiple offers are returning on a good number of properties,” said NAR chief economist Lawrence Yun. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines.”

With home prices easing over the past several months and mortgage rates down from their most recent high of 7.08% last November, housing affordability has increased. According to the NAR, the Housing Affordability Index has now improved for four straight months, sitting at its highest level since March 2022.

While recent residential construction, sales, and affordability figures might provide some sense of optimism for wood products traders, other facets of the overall economy continue to present issues that leave consumers and business owners nervous. With the collapse of Silicon Valley Bank and Signature Bank, credit is likely to tighten, making it more difficult to finance various aspects of the economy while heightening the potential for a recession.

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